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How to Slash Common Healthcare Supply Chain Management Costs

Healthcare leaders focused on keeping supply chain management costs down are working more strategically to combat high premiums and messy clinical documentation.

By Jacqueline DiChiara

- Healthcare supply chain management strategies are generally tied to keeping costs low. But with an apparently broken system still in place, this is not a simple task.

supply chain management

Whereas other industries seem to have made supply chain progress, the healthcare industry is apparently lagging. Costs may become too steep to manage because of facets that often go overlooked, such as unjustifiably high premiums, messy clinical documentation, and a lack of variation.

As a follow-up to our conversation last June, RevCycleIntelligence.com chatted with Steve Kiewiet, Vice President of Supply Chain Operations at BJC HealthCare, about how to effectively manage some of the most common supply chain cost challenges.

Kiewiet presents 5 strategies to keep supply chain costs down.

Consider what works well for other industries

Other industries aside from healthcare have already developed solid supply chain strategies to better understand the total cost of ownership, says Kiewiet.

The retail industry, for instance, has consistent marketing standards for barcodes in place which the healthcare industry has yet to implement.

“We’ve got products coming in every day that have 2 or 6 barcodes on the product. Which one will you read? They all have a different format. I either need several different scanners or a scanner that will read several different formats.”

But healthcare leaders are actively working to upgrade talent, systems, and tools to work more strategically and consider advantageous investment opportunities.

Price accuracy, clinical documentation may reduce waste

Price accuracy across the supply chain industry is subpar across the board, Kiewiet explains. And financial waste is common when it comes to managing price files and maintaining accuracy levels.

“Healthcare is still one of the few spaces I'm aware of where ‘new and improved’ always equals ‘much more expensive,’ without any evidence-based proof of any improvement for the patient, clinician or system.”

“We've created this habit in our industry where a supplier changes something with no documentable, provable evidence. But as soon as we name it differently we're willing to pay exorbitant premiums.”

Cleaner clinical documentation may help boost price accuracy standards and drive out financial waste.

If a patient had a procedure done where four products came out of inventory, records must show four products were used, charged for, and billed, Kiewiet explains.

If 1 percent of a population is over 7 feet tall, for instance, certain products will be required – or not required – depending on their specific medical needs, he says.

But Kiewiet says this rather basic mentality contradicts commonplace supply chain approach, which is essentially “where we just buy a lot of everything in hopes that we might need it.”

It all comes down to knowing what products were used according to patients’ various conditions, he says. This makes it easier to track outcomes. Then, value-based outcomes can be directly tied back to their corresponding product, he adds.

Strategic alignment keeps costs at bay

In terms of keeping supply chain costs in check, Kiewiet says it all comes down to the advancement of strategic alignment.

“At a certain level, the titanium joint or cobalt chrome joint is kind of the same. We've always lacked the ability to truly compare those products by looking at specifications and functionality.”

Variation in healthcare – i.e. variation in clinical practice, clinical product, and variation in training across medical schools – may need to be the next big focus, Kiewiet explains.

“It’s a long journey. Our professional staffs are highly educated. Physicians, surgeons and other clinical professionals have been conditioned and trained, in many cases from medical school on, in a very certain way.”

Kiewiet says this array of variation leads to greater patient risk and tremendous expense across the system.

“In the healthcare arena, supply chain is being viewed as a much more strategic enabler of health system objectives then in the past. A lot of that's driven by the economics of health care changing. What you pay for things goods and service now matters much more than it used to.”

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